European CLO leverage ‘at 2007 levels’
Leverage levels of the single-B rated issuers that dominate European CLO portfolios are back to 2007 levels, according to Moody’s. But despite Europe’s continued deterioration of loan covenant quality and weak economic growth, the ratings agency still expects the asset class to perform strongly in 2015.
Leverage has increased across rating categories since 2010, owing to easy access to credit as yield-hungry investors have lent to weaker companies in order to boost returns.
However, single-B rated company leverage is now around 5.5 times, which matches the figure for 2007, said Moody’s.The European CLO ...